VALERO ENERGY CORPORATION

                  EXECUTIVE STOCK INCENTIVE PLAN


           Amended and Restated as of November 21, 1996

<PAGE>
                        Table of Contents


SECTION 1.  Purpose. . . . . . . . . . . . . . . . . . . . . . .1

SECTION 2.  Definitions. . . . . . . . . . . . . . . . . . . . .1

SECTION 3.  Administration.. . . . . . . . . . . . . . . . . . .2

SECTION 4.  Shares and Other Property Available For Awards.. . .3
     Shares Available. . . . . . . . . . . . . . . . . . . . . .3
     Sources of Shares Deliverable Under Awards. . . . . . . . .3
     Adjustments . . . . . . . . . . . . . . . . . . . . . . . .4
     Share Counting. . . . . . . . . . . . . . . . . . . . . . .5

SECTION 5.  Eligibility. . . . . . . . . . . . . . . . . . . . .5

SECTION 6.  Awards.. . . . . . . . . . . . . . . . . . . . . . .5
     Options . . . . . . . . . . . . . . . . . . . . . . . . . .5
          Exercise Price . . . . . . . . . . . . . . . . . . . .5
          Incentive Stock Options. . . . . . . . . . . . . . . .5
     Stock Appreciation Rights . . . . . . . . . . . . . . . . .6
          Grant Price. . . . . . . . . . . . . . . . . . . . . .6
          Other Terms and Conditions . . . . . . . . . . . . . .6
     Restricted Stock. . . . . . . . . . . . . . . . . . . . . .6
          Dividends. . . . . . . . . . . . . . . . . . . . . . .6
          Registration . . . . . . . . . . . . . . . . . . . . .6
          Forfeiture . . . . . . . . . . . . . . . . . . . . . .6
     Performance Awards. . . . . . . . . . . . . . . . . . . . .6
          Terms and Conditions . . . . . . . . . . . . . . . . .7
          Payment of Performance Awards. . . . . . . . . . . . .7
     Stock Compensation. . . . . . . . . . . . . . . . . . . . .7
     Other Stock-Based Awards. . . . . . . . . . . . . . . . . .7
     General . . . . . . . . . . . . . . . . . . . . . . . . . .7
          Grants . . . . . . . . . . . . . . . . . . . . . . . .7
          Forms of Payment by Company. . . . . . . . . . . . . .7
          Limits on Transfer . . . . . . . . . . . . . . . . . .8
          Term of Awards . . . . . . . . . . . . . . . . . . . .8
          Share Certificates . . . . . . . . . . . . . . . . . .8
          Delivery of Shares or other Securities and Payment 
            by Participant of Consideration. . . . . . . . . . .8
          Termination of Employment. . . . . . . . . . . . . . .8
          Award Agreements . . . . . . . . . . . . . . . . . . .9
          Deferral of Receipt. . . . . . . . . . . . . . . . . .9
     Exercise of Option or SAR Awards. . . . . . . . . . . . . .9
          Notice . . . . . . . . . . . . . . . . . . . . . . . .9
          Payment. . . . . . . . . . . . . . . . . . . . . . . 10
          Tax Payment Election . . . . . . . . . . . . . . . . 10
          Payment with Stock . . . . . . . . . . . . . . . . . 10
          Valuation. . . . . . . . . . . . . . . . . . . . . . 10
          Rights as Stockholder. . . . . . . . . . . . . . . . 11

SECTION 7.  Amendment and Termination. . . . . . . . . . . . . 11
     Amendments to the Plan. . . . . . . . . . . . . . . . . . 11
     Amendments to Awards. . . . . . . . . . . . . . . . . . . 11
     Unusual or Nonrecurring Events. . . . . . . . . . . . . . 11

SECTION 8.  Change Of Control. . . . . . . . . . . . . . . . . 12
     Nonacceleration . . . . . . . . . . . . . . . . . . . . . 12
     Effect. . . . . . . . . . . . . . . . . . . . . . . . . . 12
     Defined . . . . . . . . . . . . . . . . . . . . . . . . . 13

SECTION 9.  General Provisions.. . . . . . . . . . . . . . . . 13
     No Rights to Awards . . . . . . . . . . . . . . . . . . . 13
     Delegation. . . . . . . . . . . . . . . . . . . . . . . . 13
     Withholding . . . . . . . . . . . . . . . . . . . . . . . 13
     No Limit on Other Compensation Arrangements . . . . . . . 14
     No Right to Employment. . . . . . . . . . . . . . . . . . 14
     Governing Law . . . . . . . . . . . . . . . . . . . . . . 14
     Severability. . . . . . . . . . . . . . . . . . . . . . . 14
     Other Laws. . . . . . . . . . . . . . . . . . . . . . . . 14
     No Trust or Fund Created. . . . . . . . . . . . . . . . . 14
     No Fractional Shares. . . . . . . . . . . . . . . . . . . 14
     Headings. . . . . . . . . . . . . . . . . . . . . . . . . 14
     Construction. . . . . . . . . . . . . . . . . . . . . . . 14

SECTION 10.  Effective Date of the Plan. . . . . . . . . . . . 15

SECTION 11.  Term of the Plan. . . . . . . . . . . . . . . . . 15

<PAGE>

                  EXECUTIVE STOCK INCENTIVE PLAN

SECTION 1.  Purpose.

The purposes of the Valero Energy Corporation Executive Stock Incentive Plan
(the "Plan") are to promote the interests of Valero Energy Corporation
(together with any successor thereto, the "Company") and its stockholders by
(i) attracting and retaining executive personnel and other key employees of
the Company and its affiliates; (ii) motivating these employees by using
performance-related incentives to achieve longer range performance goals; and
(iii) enabling these employees to participate in the long-term growth and
financial success of the Company. 

SECTION 2.  Definitions.

As used in the Plan, the following terms shall have the meanings set forth
below: 

(a)  "Affiliate" shall mean (i) any entity that, directly or through one or
more intermediaries, is controlled by the Company and (ii) any entity in which
the Company has a significant equity interest, as determined by the Committee.

(b)  "Award" shall mean any Option, Stock Appreciation Right, Restricted
Stock, Performance Award, Stock Compensation Award or Other Stock-Based Award. 

(c)  "Award Agreement" shall mean any written agreement, contract, or other
instrument or document evidencing any Award, which may, but need not, be
executed or acknowledged by a Participant.

(d)  "Board" shall mean the Board of Directors of the Company.

(e)  "Change of Control" is defined in Section 8(b) of the Plan.

(f)  "Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time. 

(g)  "Committee" or "Compensation Committee" shall mean the Compensation
Committee of the Board as further described in Section 3 of the Plan. 

(h)  "Employee" shall mean any employee of the Company or of any Affiliate. 

(i)  "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended. 

(j)  "Exercise Notice" is defined in Section 6(h) of the Plan.

(k)  "Fair Market Value" shall mean the average of the "high" and "low"
reported sales price per Share (as reported in the New York Stock Exchange -
Composite Transactions listing) as of the relevant measuring date, or if there
are no sales on the New York Stock Exchange on that measuring date, then as of
the next following day on which there were sales.

(l)  "Incentive Stock Option" shall mean an option granted under Section 6(a)
of the Plan that is intended to meet the requirements of Section 422 of the
Code or any successor provision thereto. 

(m)  "Non-Qualified Stock Option" shall mean an option granted under Section
6(a) of the Plan that is not intended to be an Incentive Stock Option.

(n)  "Notice Date" is defined in Section 6(h) of the Plan.

(o)  "Option" shall mean an Incentive Stock Option or a Non-Qualified Stock
Option.

(p)  "Other Stock-Based Award" shall mean any right granted under Section 6(f)
of the Plan.

(q)   "Participant" shall mean any Employee granted an Award under the Plan.

(r)  "Performance Award" shall mean any right granted under Section 6(d) of
the Plan.

(s)  "Person" shall mean any individual, corporation, partnership,
association, joint-stock company, trust, unincorporated organization,
government or political subdivision thereof or other entity.

(t)  "Restricted Stock" shall mean any Share, prior to the lapse of
restrictions thereon, granted under Section 6(c) of the Plan.

(u)  "Rule 16b-3" shall mean Rule 16b-3 promulgated by the SEC under the
Exchange Act, or any successor rule or regulation thereto as in effect from
time to time.

(v)  "SAR" or "stock appreciation right" shall mean the right, subject to the
provisions of this Plan, to receive a payment in cash equal to the difference
between the specified exercise price of the SAR and the Fair Market Value of
one share of the Common Stock.

(w)  "SEC" shall mean the Securities and Exchange Commission, or any successor
thereto.

(x)  "Settlement Date" is defined in Section 6(h) of the Plan.

(y)  "Share" or "Shares" shall mean the common stock of the Company, $1.00 par
value, and other securities or property that may become the subject of Awards
or become subject to Awards pursuant to an adjustment made under Section 4(b)
of the Plan.

(z)  "Stock Compensation" shall mean any right granted under Section 6(e) of
the Plan.

(aa) "Tax Payment" is defined in Section 6(h) of the Plan.

SECTION 3.  Administration.

The Plan shall be administered by a committee composed solely of two or more 
Non-Employee Directors" (as defined in Rule 16b-3 under the Exchange Act) of
the Company, which Committee shall be, except as hereinafter set forth, the
Compensation Committee.  In the event that the membership of the Compensation
Committee shall fail to meet the foregoing criteria, then additional or
different members of the Board of Directors shall be appointed by the Board to
act for purposes of administering this Plan so that the committee
administering this Plan shall consist solely of two or more  Non-Employee
Directors."  Subject to the terms of the Plan and applicable law, and in
addition to other express powers and authorizations conferred on the Committee
by the Plan, the Committee shall have authority to:

(a)  designate Participants;

(b)  determine the type or types of Awards to be granted to an eligible
Employee;

(c)  determine the number of Shares to be covered by, or with respect to which
payments, rights, or other matters are to be calculated in connection with,
Awards;

(d)  determine the terms and conditions of any Award and any subsequent
amendments thereto;

(e)  determine to what extent and under what circumstances Awards may be
settled or exercised in cash, Shares, other securities, other Awards or other
property, or cancelled, forfeited, or suspended, and the method or methods by
which Awards may be settled, exercised, cancelled, forfeited, or suspended;

(f)  determine to what extent and under what circumstances any amount payable
(in whatever form) with respect to an Award may be deferred either
automatically or at the election of the holder thereof or the Committee;

(g)  provide for the acceleration of any time period relating to the vesting,
exercise or realization of any Award so that the Award may be exercised or
realized in full on or before a date fixed by the Committee; the Committee
may, in its discretion, include other provisions and limitations in any Award
Agreement as the Committee may deem equitable and in the best interests of the
Company;

(h)  interpret and administer the Plan and any instrument or agreement
relating to the Plan, including Award Agreements. 

(i)  establish, amend, suspend, or waive any rules or regulations regarding
the Plan, and appoint any agent the Committee shall deem appropriate for the
proper administration of the Plan; and

(j)  make any other determination and take any other action that the Committee
deems necessary or desirable for the administration of the Plan.  Unless
otherwise expressly provided in the Plan, all designations, determinations,
interpretations, and other decisions with respect to the Plan or any Award
shall be within the sole discretion of the Committee, may be made at any time,
and shall be final, conclusive, and binding upon all Persons, including the
Company, any Affiliate, any Participant, any holder or beneficiary of any
Award, any stockholder of the Company and any Employee. 

SECTION 4.  Shares and Other Property Available For Awards.

(a)  Shares Available.  Subject to adjustment as provided in Section 4(c), the
number of Shares with respect to which Awards may be granted under the Plan
shall be 2,100,000.  No more than 750,000 of the Shares available for Awards
shall be issued as Restricted Stock.  The maximum aggregate number of Shares
available for Options and SARs to any one Participant during any 12-month
period is equal to 500,000 or any lesser amount that will enable the Company
to comply with the deductibility requirements of Section 162(m) of the Code
and the rules promulgated thereunder as determined by the Committee.

(b)  Sources of Shares Deliverable Under Awards.  Any Shares delivered
pursuant to an Award may consist, in whole or in part, of authorized and
unissued Shares or treasury Shares.

(c)  Adjustments.  (i)  If all or any portion of an Award vests or is
exercised subsequent to any stock dividend, rights distribution, split-up,
recapitalization, combination or exchange of shares, merger, consolidation,
acquisition of property or stock, spin-off or separation, reorganization, or
liquidation (any one of which being hereafter referred to as a "Reorganization
Event"), as a result of which shares or other securities of any class or
rights shall be issued in respect of outstanding Shares, or Shares shall be
changed into the same or a different number of shares of the same or another
class or classes or other securities, the person exercising or otherwise
entitled to such Award shall receive, 

     (A)  for the aggregate price payable upon such exercise of an Option, or
upon vesting of an Award (other than an Option) denominated in Shares (i) the
aggregate number and class of shares, rights or other securities for which a
recognized market exists, and (ii) a cash amount equal to the fair market
value (as reasonably determined by the Committee) on such exercise or vesting
date of any other property (other than regular cash dividend payments) and of
any shares, rights or other securities for which no recognized market exists,
which, if Shares (as authorized at the date of the granting of such Award) had
been acquired at the date of granting of the Award for the same aggregate
price (on the basis of the price per share, if any, provided in the Award) and
had not been disposed of, such person or persons would be holding at the time
of such exercise or vesting as a result of such acquisition and any such
Reorganization Event, and

     (B)  a cash amount upon the exercise of any SARs equal to the difference
between the aggregate Grant Price of such SARs and the aggregate of (i) the
fair market value, on the exercise date of any whole shares, rights or other
securities for which a recognized market exists, and (ii) the fair market
value (as reasonably determined by the Committee) on such date of any other
property (other than regular cash dividend payments) which the holder of a
number of Shares equal to the number of such SARs, if such Shares had been
purchased at the date of granting of such SARs and not otherwise disposed of,
would be holding at the time of exercise of such SARs as a result of such
purchase and any such Reorganization Event; 

     provided, however, that no fractional Share, fractional right or other
fractional security shall be issued upon any such exercise or vesting, and the
aggregate price paid shall be appropriately reduced to reflect any fractional
Share, fractional right or other fractional security not issued; and provided
further, however, that if the exercise or vesting of any Award subsequent to
any Reorganization Event would, pursuant to clause (a) of this Section
4(c)(i), require the delivery of shares, rights or other securities which the
Company is not then authorized to issue or which in the sole judgment of the
Committee cannot be issued without undue effort or expense, the person
exercising or vesting in such Award shall receive, in lieu of such shares,
rights or other securities, a cash payment equal to the Fair Market Value on
the exercise or vesting date, as the case may be, as reasonably determined by
the Committee, of such shares, rights or other securities.   For purposes of
applying the provisions of this Plan, the Preference Share Purchase Rights
distributed to stockholders of the Company pursuant to the Rights Agreement
(dated as of October 25, 1995, between the Company and Harris Trust and
Savings Bank, the "Rights Agreement"), shall be deemed not to have been
distributed until the Distribution Date (as defined in the Rights Agreement).

     (ii)  In the event of any change in the number of Shares outstanding
resulting from a Reorganization Event, the aggregate number and class of
Shares remaining available to be awarded under this Plan shall be that number
and class which a person, to whom an Award had been granted for all of the
available Shares under this Plan on the date preceding such change, would be
entitled to receive as provided in Section 4(c)(i).

     (iii)  Upon the occurrence of any Reorganization Event, the Committee
shall be entitled (but shall not be required) to determine that new Award
Agreements shall be entered into with Participants reflecting such event.

(d)  Share Counting.  For purposes of determining at any time the number of
Shares that remain available for grant under this Plan, the number of Shares
then authorized pursuant to Section 4 of the Plan shall be (i) decreased by
the "gross" number of Shares issued pursuant to exercised Awards, (ii)
decreased by the "gross" number of Shares issuable pursuant to outstanding
unexercised Awards, and (iii) increased by the difference between the "gross"
number of Shares and the "net" number of Shares issued pursuant to exercised
Awards.  As used herein, the "gross" number of Shares refers to the maximum
number of Shares that may be issued upon the exercise of an Award.  The "net"
number of Shares refers to the net number of Shares actually issued to an
Award holder upon exercise of an Award, after reducing the "gross" number of
Shares by the number of Shares tendered back to the Company in payment of the
Award's exercise price or for the satisfaction of any Tax Payment obligation. 
If a Participant shall forfeit, voluntarily surrender or otherwise permanently
lose his or her right to exercise an Award under any provision of this Plan or
otherwise, or if any Award shall terminate or expire pursuant to its terms,
the Shares subject to the Award shall once again be available to be awarded
and sold under this Plan pursuant to a new Award granted hereunder.

SECTION 5.  Eligibility.

Any Employee who is not a member of the Committee, including any officer or
employee-director of the Company or any affiliate, shall be eligible to be
designated a Participant.

SECTION 6.  Awards.

(a)  Options.  In determining that an eligible Employee shall be granted an
Option, the Committee shall determine, subject to the provisions of the Plan,
the number of Shares to be covered by each Option, the purchase price therefor
and the conditions and limitations applicable to the exercise of the Option,
including the following terms and conditions and any additional terms and
conditions not inconsistent with the provisions of the Plan as the Committee
shall determine.

     (i)  Exercise Price.  The purchase price per Share purchasable under an
Option shall be determined by the Committee at the time each Option is
granted; provided, that the purchase price per Share shall not be less than
100% of Fair Market Value on the date of grant.

     (ii) Incentive Stock Options.  The terms of any Incentive Stock Option
granted under the Plan shall comply in all respects with the provisions of
Section 422 of the Code, or any successor provision, and any regulations
promulgated thereunder.

(b)  Stock Appreciation Rights.  Subject to the provisions of the Plan, in
determining the Employees to whom SARs shall be granted, the Committee shall
determine the number of Shares to be covered by each SAR Award, the grant
price thereof and the conditions and limitations applicable to the exercise
thereof.  SAR Awards shall be payable in cash only and may be granted in
tandem with another Award, in addition to another Award, or freestanding and
unrelated to another Award.  SARs granted in tandem with or in addition to
another Award may be granted either at the same time as the other Award or at
a later time.

     (i)  Grant Price.  The grant price of an SAR shall be determined by the
Committee.

     (ii) Other Terms and Conditions.  Subject to the terms of the Plan and
any applicable Award Agreement, the Committee shall determine, at or after the
grant of an SAR, the term, methods of exercise, and any other terms and
conditions of any SAR.

(c)  Restricted Stock.  Subject to the provisions of the Plan, in determining
the Employees to whom Restricted Stock shall be granted, the Committee shall
determine the number of Shares of Restricted Stock to be granted to each
Participant, the duration of the restriction period during which, and the
conditions under which, the Restricted Stock may be forfeited to the Company,
and the other terms and conditions of the Awards.

     (i)  Dividends.  Unless otherwise determined by the Committee, a
Restricted Stock Award shall provide for the payment of dividends during its
restriction period.  Dividends paid on Restricted Stock may be paid directly
to the Participant, may be subject to risk of forfeiture, and may be subject
to transfer restrictions during any period established by the Committee, all
as determined by the Committee in its discretion. 

     (ii) Registration.  Any Restricted Stock may be evidenced in any manner
deemed appropriate by the Committee, including book-entry registration or the
issuance of stock certificates.  If any stock certificate is issued with
respect to Restricted Stock, the certificate shall be registered in the name
of the Participant and may bear an appropriate legend referring to the terms,
conditions, and restrictions applicable to the Restricted Stock.

     (iii)     Forfeiture.  Except as otherwise determined by the Committee,
upon termination of a Participant's employment (as determined under criteria
established by the Committee) for any reason during the applicable restriction
period, all Restricted Stock shall be forfeited by the Participant to the
Company without compensation therefor.  However, when the Committee finds that
a waiver would be in the best interests of the Company, the Committee may
waive in whole or in part any or all remaining restrictions with respect to
the Restricted Stock held by the Participant whose employment is terminating. 
Unrestricted Shares, evidenced in any manner as the Committee shall deem
appropriate, shall be issued to the holder of Restricted Stock promptly after
the applicable restrictions have lapsed or otherwise have been satisfied.

(d)  Performance Awards.  The Committee shall have authority to determine the
Employees who may receive a Performance Award, which shall consist of a right,
(A) denominated or payable in cash, Shares, other securities or other property
(including Restricted Stock), and (B) that shall confer on the holder thereof,
rights valued at an amount determined by the Committee and payable to or
exercisable by the holder thereof, in whole or in part, upon the achievement
of prescribed performance goals during prescribed performance periods as the
Committee shall establish.

     (i)  Terms and Conditions.  Subject to the terms of the Plan and any
applicable Award Agreement, the Committee shall determine the performance
goals to be achieved during any performance period, the length of any
performance period, the amount of any Performance Award and the amount of any
payment or transfer to be made pursuant to any Performance Award.

     (ii) Payment of Performance Awards.  Performance Awards may be paid in a
lump sum or in installments following the close of the performance period or,
in accordance with procedures established by the Committee, on a deferred
basis.

(e)  Stock Compensation.  The Committee shall have authority to pay in Shares
all or any portion of the amounts payable under any compensation program of
the Company.  The number and type of Shares to be distributed in lieu of the
cash compensation applicable to any Award, as well as the terms and conditions
of any bonus awards, shall be determined by the Committee.

(f)  Other Stock-Based Awards.  The Committee is hereby authorized to grant to
eligible Employees an "Other Stock-Based Award", which shall consist of a
right 

     (i)  that is not an Award or right described in Section 6(a), (b), (c),
(d), or (e) above and 
      (ii) that is denominated or payable in, valued in whole or in part by
reference to, or otherwise based on or related to, Shares (including
securities convertible into Shares), as are deemed by the Committee to be
consistent with the purposes of the Plan; provided, that any such rights must
comply, to the extent deemed desirable by the Committee, with Rule 16b-3 and
applicable law.  Subject to the terms of the Plan and any applicable Award
Agreement, the Committee shall determine the terms and conditions of any Other
Stock-Based Award. 

(g)  General.

     (i)  Grants.  Awards may be granted, in the discretion of the Committee,
either alone or in addition to, in tandem with, or in substitution for any
other Award granted under the Plan or any award granted under any other plan
of the Company or any Affiliate.  Awards granted in addition to or in tandem
with other Awards or awards granted under any other plan of the Company or any
Affiliate may be granted either at the same time as or at a different time
from the grant of other Awards or awards.  The Committee may authorize the
grant of Awards prior to stockholder approval of the Plan, but any Award
granted by the Committee shall be contingent upon stockholder approval of the
Plan.

     (ii) Forms of Payment by Company.  Subject to the terms of the Plan and
of any applicable Award Agreement, payments or transfers to be made by the
Company or an Affiliate upon the grant, exercise or payment of an Award may be
made in any form as the Committee shall determine, including cash, Shares,
other securities, other Awards or other property, or any combination thereof,
and may be made in a single payment or transfer, in installments, or on a
deferred basis, in each case in accordance with rules and procedures
established by the Committee.  These rules and procedures may include, without
limitation, provisions for the payment or crediting of reasonable interest on
installment or deferred payments.

     (iii)     Limits on Transfer.

          (A)  Each Award, and each right under any Award, shall be
exercisable only by the Participant during the Participant's lifetime, or if
permissible under applicable law, (i) by the Participant's beneficiary, (ii)
by an immediate family member as a transferee receiving the Award pursuant to
a gift, or (iii) by any transferee authorized by the Committee below.

          (B)  Without prior written approval from the Committee, no Award and
no right under any Award may be assigned, alienated, pledged, attached, sold
or otherwise transferred or encumbered by a Participant otherwise than as
provided in Paragraph (A) above or by will or by the laws of descent and
distribution and any purported assignment, alienation, pledge, attachment,
sale, transfer or encumbrance shall be void and unenforceable against the
Company or any Affiliate. 

     (iv) Term of Awards.  The term of each Award shall be for the period
determined by the Committee; provided, that in no event shall the term of any
Incentive Stock Option exceed a period of 10 years from the date of its grant.

     (v)  Share Certificates.  All certificates for Shares or other securities
of the Company or any Affiliate delivered under the Plan pursuant to any Award
or the exercise thereof shall be subject to (i) all stop transfer orders and
other restrictions as the Committee may deem advisable under the Plan, (ii)
the rules, regulations, and other requirements of the SEC and any stock
exchange upon which the Shares or other securities are then listed, (iii) and
any applicable federal or state laws.  The Committee may cause a legend or
legends to be put on any stock certificates to make appropriate reference to
applicable restrictions.

     (vi) Delivery of Shares or other Securities and Payment by Participant of
Consideration.  No Shares or other securities shall be delivered pursuant to
any Award until payment in full of any amount required to be paid pursuant to
the Plan or the applicable Award Agreement is received by the Company. 
Payment may be made in any form or method prescribed by the Committee,
including cash, Shares, other securities, other Awards or other property, or
any combination thereof, provided that the combined value, as determined by
the Committee, of all cash and cash equivalents and the Fair Market Value of
any Shares or other property tendered to the Company as of the date of such
tender, is at least equal to the full amount required to be paid.

     (vii)     Termination of Employment.

          (A)  Except as otherwise provided in the Plan, or otherwise
determined by the Committee on the date of grant and included in the Award
Agreement, an Award vests to and/or may be exercised by a Participant only
while the Participant is and has continually been since the date of the grant
of the Award an Employee.  If a Participant's employment with the Company is
voluntarily terminated by the Participant (other than through retirement,
death or disability), then all unexercised Awards previously granted to that
Participant under the Plan shall lapse automatically and be forfeited 30 days
following the date of the Participant's termination of employment.  If a
Participant's employment is terminated by the Company other than for "cause"
(as determined by the Company), then all unexercised Awards previously granted
to the Participant shall lapse and be forfeited by the Participant 90 days
after termination of employment.

          (B)  If a Participant's employment is terminated because of
retirement, death or total and permanent disability (with the determination of
disability to be made within the sole discretion of the Committee), any
unexercised Award held by the Participant shall remain outstanding according
to the Award's original terms; alternatively, the Committee or, except with
respect to a Participant subject to Section 16 under the Exchange Act, the
Chief Executive Officer of the Company, may prescribe new or additional terms
for the vesting, exercise or realization of the Award.  Absent any
determination by the Committee or the Chief Executive Officer to the contrary,
any unexercised Award held by a Participant whose employment is terminated
because of retirement, death or disability shall vest or become exercisable
according to the Award's original terms.

          (C)  In connection with the termination of any Participant from
employment with the Company, the Chief Executive Officer of the Company is
authorized to determine which, if any, of the foregoing provisions of this
clause (vii) shall apply, such determination to be binding upon the Company.

     (viii)    Award Agreements.  Awards shall be evidenced by Award
Agreements having terms and conditions, not inconsistent with the Plan, as
prescribed by the Committee.  Award Agreements need not be uniform.

     (ix) Deferral of Receipt.  By filing a written request with the Committee
not later than December 31st of any calendar year, a Participant may elect to
defer receipt of all or any portion of any stock to be awarded pursuant to a
Restricted Stock award, Performance Award or Other Stock-Based Award which,
absent such election, the Participant would be entitled to receive during the
calendar year following the Participant's request (hereafter referred to as
the "Deferred Award").  The Deferred Award will be delivered to the
Participant on January 2nd of the second calendar year following the calendar
year in which the deferral election is made.  Successive elections may be made
with respect to the same Deferred Award to defer from year to year the receipt
of such Deferred Award.  Each Participant shall be solely responsible for
determining the personal income tax effect of making any deferral election;
the Company makes no representation that such election shall have the effect
of deferring receipt of any income attributable to the Deferred Award for
federal income tax purposes.

(h)  Exercise of Option or SAR Awards.

     (i)  Notice.  Unless otherwise prescribed by the Committee, Awards may be
exercised only by written notice of exercise (the "Exercise Notice"), in the
form prescribed by the Committee, delivered to the Company to the Financial
Benefit Plan Administration Manager, and signed by the Participant, other
person acting on behalf of the Participant or transferee being entitled to
exercise the same.  The date on which the Exercise Notice is delivered to the
Company shall be the "Notice Date."  The Exercise Notice shall specify a date
(the "Settlement Date"), not less than five business days nor more than ten
business days following the Notice Date, upon which the Shares or other rights
shall be issued or transferred to the Participant (or other person entitled to
exercise the Award) and the Award's exercise price shall be paid to the
Company.

     (ii) Payment.  Unless otherwise prescribed by the Committee, on the
Settlement Date, the person exercising an Award shall tender to the Company
full payment for the Shares or other rights with respect to which the Award is
exercised, together with an additional amount, in cash, certified check,
cashier's check or bank draft approved by Valero, equal to the amount of any
taxes required to be collected or withheld by the Company in connection with
the exercise of the Award (the "Tax Payment").

     (iii)     Tax Payment Election.  Subject to the approval of the
Committee, and to any rules and limitations as the Committee may adopt, a
person exercising an Award may make the Tax Payment in whole or in part by
electing, at or before the time of exercise of the Award, either (a) to have
the Company withhold from the number of Shares otherwise deliverable a number
of Shares whose Fair Market Value equals the Tax Payment, or (b) to deliver
certificates for other Shares owned by the person exercising the Award,
endorsed in blank with appropriate signature guarantee, having a Fair Market
Value equal to the amount otherwise to be collected or withheld.  Following
any election to withhold Shares or deliver other Shares to make a Tax Payment,
the Committee shall have sole discretion to approve or disapprove the election
at any time prior to the Settlement Date.  If the election is disapproved, the
Tax Payment shall be made in cash, or in any combination of cash and Shares as
the Committee may direct.  If the Committee shall fail to disapprove the
election prior to the Settlement Date, the election will be deemed approved. 

     (iv) Payment with Stock.  Subject to approval by the Committee, a person
exercising an Award for the receipt of Shares may pay for the Shares by
tendering to the Company other Shares legally and beneficially owned by that
person at the time of the exercise of the Award.  If approved by the
Committee, this method of exercise may include use of a procedure whereby a
person exercising an Award may request that Shares received upon exercise of a
portion of an Award be automatically applied to satisfy the exercise price for
additional and increasingly larger portions of the Award.  The certificate(s)
representing any Shares tendered in payment of an Award's exercise price must
be accompanied by a stock power duly executed with appropriate signature
guarantees.  The Committee may, in its sole discretion, refuse any tender of
Shares in which case the Company shall promptly redeliver the Shares to the
person exercising the Award and notify the person of the refusal as soon as
practicable.  In this event, the person may either (a) tender to the Company
on the Settlement Date the cash amount required to pay for the Award's Shares,
or (b) rescind the Exercise Notice.  If the person elects to rescind his or
her Exercise Notice, the person may again (subject to the other terms of this
Plan) deliver an Exercise Notice with respect to the Award at any time prior
to its expiration date.

     (v)  Valuation.  Any calculation with respect to a Participant's income,
required tax withholding or other matters required to be made by the Company
upon the exercise of an Award shall be made using the Fair Market Value of the
Shares on the Notice Date, whether or not the Exercise Notice is delivered to
the Company before or after the close of trading on that date, unless
otherwise specified by the Committee.

     (vi) Rights as Stockholder. Except as provided in Section 6(c) of this
Plan, until the issuance of the stock certificate(s) for Shares purchased
hereunder (as evidenced by the appropriate entry on the books of the Company
or any authorized transfer agent of the Company), no right to vote or receive
dividends or any other rights as a stockholder of the Company shall exist with
respect to such Shares, notwithstanding the exercise of any Award.  No
adjustment will be made for a dividend or other rights for which the record
date is prior to the date the stock certificates evidencing such Shares are
issued, except as otherwise provided in this Plan.

SECTION 7.  Amendment and Termination.

Except to the extent prohibited by applicable law and unless otherwise
expressly provided in an Award Agreement or in the Plan:

(a)  Amendments to the Plan.  The Board may amend, alter, suspend,
discontinue, or terminate the Plan without the consent of any stockholder,
Participant, other holder or beneficiary of an Award, or other Person;
provided that notwithstanding any other provision of the Plan or any Award
Agreement, without the approval of the stockholders of the Company no
amendment, alteration, suspension, discontinuation, or termination may be made
that would: 

     (i)  materially increase the total number of Shares available for Awards
under the Plan (except as provided in Section 4) or materially increase the
benefits accruing to Participants under the Plan;

     (ii) permit Awards encompassing rights to purchase Shares to be granted
with a per Share grant, exercise or purchase price of less than the Fair
Market Value of a Share on the grant thereof; or

     (iii)     otherwise cause the Plan to cease to qualify for or cease to
comply with any tax or regulatory exemption, status or requirement, including
for these purposes any approval or other prerequisite for exemptive relief
from Section 16(b) of the Exchange Act.

(b)  Amendments to Awards.  The Committee may waive any conditions or rights
under, amend any terms of, or alter any Award theretofore granted, provided
that no change in any Award shall reduce the benefit accruing to any
Participant without the consent of the Participant. 

(c)  Unusual or Nonrecurring Events.  The Committee is hereby authorized to
make adjustments in the terms, conditions, and criteria of Awards in
recognition of unusual or nonrecurring events (including the events described
in Section 4(c) of the Plan) affecting the Company, any Affiliate, or the
financial statements of the Company or any Affiliate, or in recognition of
changes in applicable laws, regulations, or accounting principles, whenever
the Committee determines that such adjustments are appropriate in order to
prevent dilution or enlargement of the benefits or potential benefits intended
to be made available under the Plan.  Notwithstanding the foregoing, with
respect to any Award intended to qualify as performance-based compensation
under Section 162(m) of the Code, no adjustment shall be authorized to the
extent the adjustment would cause the Award to fail to qualify.

SECTION 8.  Change Of Control.

(a)  Nonacceleration.  In the event of any Change of Control, the Chief
Executive Officer of the Company may on or before the date of the event
constituting a Change of Control, file with the Corporate Secretary of the
Company a written notice (the "Nonacceleration Notice") signed by the officer
stating that the Change of Control shall not result in the acceleration of
Awards granted under the Plan to the Participants identified in the notice (or
held by persons claiming by, through or under such Participants).  The
Nonacceleration Notice may be filed with respect to all Awards granted under
the Plan or with respect to certain Awards granted to Participants specified
in the notice (each Participant referred to by name or generically in a
Nonacceleration Notice, together with each person claiming by, through or
under such Participant, is hereinafter referred to as a "Nonaccelerated
Person").  Notwithstanding any other provision of this Plan, each Award
granted under this Plan, not theretofore forfeited or terminated and held as
of the date of a Change of Control by a person who as of such date is not a
Nonaccelerated Person shall upon occurrence of the Change of Control
immediately become vested or exercisable with respect to all of the rights
specified therein.  The inclusion of a Participant or other person as a
Nonaccelerated Person in a Nonacceleration Notice shall not be construed to
alter or amend any rights the Participant or other person may have under this
Plan under the provisions of any executive severance agreement or other
contractual relationship with the Company.

(b)  Effect.  If a Change of Control shall occur, each Award held by a
Participant pursuant to the Plan shall remain in full force and effect until
the earlier of (i) the expiration date of the Award, or (ii) 90 days following
the Participant's date of termination of employment with the Company.

     In addition to the Committee's authority set forth in Section 7(c) of the
Plan, in order to maintain the Participants' rights in the event of any Change
of Control, the Committee, as constituted before the Change of Control, is
hereby authorized, and has sole discretion, as to any Award, either at the
time the Award is made hereunder or any time thereafter, to take any one or
more of the following actions:

     (i)  provide for the acceleration of any time periods relating to the
vesting, exercise or realization of the Award so that the Award may be
exercised or realized in full on or before a date fixed by the Committee;

     (ii) provide for the purchase of any Award, upon the Participant's
request, for an amount of cash equal to the amount that could have been
attained upon the exercise of the Award or realization of the Participant's
rights in the Award had the Award been currently exercisable or payable;

     (iii)     adjust any outstanding Award as the Committee deems appropriate
to reflect the Change of Control; or

     (iv) cause any outstanding Award to be assumed, or new rights substituted
therefor, by the acquiring or surviving corporation after the Change of
Control.  The Committee may in its discretion include other provisions and
limitations in any Award Agreement as it may deem equitable and in the best
interests of the Company.

(c)  Defined.  A Change of Control shall be deemed to occur when:

     (i)  the shareholders of the Company approve any agreement or transaction
pursuant to which:  (A) the Company will merge or consolidate with any other
Person (other than a wholly owned subsidiary of the Company) and will not be
the surviving entity (or survives only as the subsidiary of another entity);
(B) the Company will sell all or substantially all of its assets to any other
Person (other than a wholly owned subsidiary of the Company); or (C) the
Company will be liquidated or dissolved;

     (ii) any "person" or "group" (as these terms are used in Section 13(d)
and 14(d) of the Exchange Act) other than the Company, any subsidiary of the
Company, any employee benefit plan of the Company or its subsidiaries, or any
entity holding Shares for or pursuant to the terms of those employee benefit
plans, is or becomes an "Acquiring Person" as defined in that certain Amended
and Restated Rights Agreement dated October 26, 1995, between the Company and
Harris Trust and Savings Bank, as Rights Agent (or any successor Rights
Agreement).

     (iii)     any "person" or "group" (as these terms are used in
subparagraph (iv) above) shall commence a tender offer or exchange offer for
30% or more of the Shares then outstanding, or for any number or amount of
Shares which, if the tender or exchange offer were to be fully subscribed and
all Shares for which the tender or exchange offer is made were to be purchased
or exchanged pursuant to the offer, would result in the acquiring person or
group directly or indirectly beneficially owning 50% or more of the Shares
then outstanding; or

     (iv) as a result of or in connection with a contested election of
directors, a number of directors equal to a majority of the Board before the
election cease to be members of the Board.

SECTION 9.  General Provisions.

(a)  No Rights to Awards.  No Employee, Participant or other Person shall have
any claim to be granted any Award.  The Committee is not required to treat
uniformly the Employees, Participants, or holders or beneficiaries of Awards
when making grants of Awards under the Plan.  The terms and conditions of
Awards are not required to be the same with respect to each recipient.

(b)  Delegation.  Subject to the terms of the Plan and applicable law, the
Committee may delegate to one or more officers or managers of the Company or
any Affiliate, or to a committee of such officers or managers, the authority,
subject to the terms and limitations the Committee shall determine, to grant
Awards to, or to cancel, modify or waive rights with respect to, or to alter,
discontinue, suspend, or terminate Awards held by, Employees who are not
deemed "officers" or "directors" of the Company for purposes of Section 16 of
the Exchange Act, or any successor Section thereto, or who are otherwise not
subject to Section 16.

(c)  Withholding.  The Company or any Affiliate is hereby authorized to
withhold from any Award, from any payment due or transfer made under any Award
or under the Plan or from any compensation or other amount owing to a
Participant the amount (in cash, Shares, other securities, other Awards or
other property) of any applicable withholding taxes with respect to an Award,
its exercise, the lapse of restrictions thereon, payment or transfer under an
Award or under the Plan, and to take any other action necessary in the opinion
of the Company to satisfy all obligations for the payment of the taxes.  (d) 
No Limit on Other Compensation Arrangements.  Nothing contained in the Plan
shall prevent the Company or any Affiliate from adopting or continuing in
effect any other compensation arrangements.

(e)  No Right to Employment.  The grant of an Award shall not be construed as
giving a Participant the right to be retained in the employ of the Company or
any Affiliate.  Further, the Company or an Affiliate may at any time dismiss a
Participant from employment, free from any liability or any claim under the
Plan, unless otherwise expressly provided in the Plan or in any Award
Agreement. 

(f)  Governing Law.  The validity, construction, and effect of the Plan and
any rules and regulations relating to the Plan shall be determined in
accordance with the laws of the State of Texas and applicable federal law.

(g)  Severability.  If any provision of the Plan or any Award is or becomes or
is deemed to be invalid, illegal, or unenforceable in any jurisdiction as to
any Person or Award, or would disqualify the Plan or any Award under any law
deemed applicable by the Committee, such provision shall be construed or
deemed amended to conform to applicable laws, or if it cannot be construed or
deemed amended without, in the determination of the Committee, materially
altering the intent of the Plan or the Award, such provision shall be stricken
as to such jurisdiction, Person or Award and the remainder of the Plan and any
such Award shall remain in full force and effect.

(h)  Other Laws.  The Committee may refuse to issue or transfer any Shares or
other consideration under an Award if, acting in its sole discretion, it
determines that the issuance or transfer of the Shares or other consideration
might violate any applicable law or regulation or entitle the Company to
recover the same under Section 16(b) of the Exchange Act, and any payment
tendered to the Company by a Participant, other holder or beneficiary in
connection with the exercise of such Award shall be promptly refunded.

(i)  No Trust or Fund Created.  Neither the Plan nor any Award shall create or
be construed to create a trust or separate fund of any kind or any fiduciary
relationship between the Company or any Affiliate and a Participant or any
other Person.  To the extent that any Person acquires a right to receive
payments from the Company or any Affiliate pursuant to an Award, such right
shall be no greater than the right of any unsecured general creditor of the
Company or any Affiliate. 

(j)  No Fractional Shares.  No fractional Shares shall be issued or delivered
pursuant to the Plan or any Award, and the Committee shall determine whether
cash, other securities, or other property shall be paid or transferred in lieu
of any fractional Shares or whether fractional Shares or any rights thereto
shall be cancelled, terminated, or otherwise eliminated.

(k)  Headings.  Headings are given to the Sections and subsections of the Plan
solely as a convenience to facilitate reference.  The headings shall not be
deemed in any way material or relevant to the construction or interpretation
of the Plan or any provision thereof. 

(l)  Construction.  Use of the term "including" in this Plan shall be
construed to mean "including but not limited to."

SECTION 10.  Effective Date of the Plan.

The Plan shall be effective July 21, 1994, subject to approval by the
stockholders of the Company.

SECTION 11.  Term of the Plan.

No Award shall be granted under the Plan 10 years after approval of the Plan
by the Board.  However, unless otherwise expressly provided in the Plan or in
an applicable Award Agreement, any Award theretofore granted may, and the
authority of the Board or the Committee to amend, alter, adjust, suspend,
discontinue, or terminate any such Award or to waive any conditions or rights
under any such Award shall, extend beyond that date.